Gold Potential Choppy Price Action Ahead
The market got what it wanted from the Federal Reserve last night when a widely anticipated interest rate cut of 25bps (0.25%) was announced, a move which as a rule is positive for Gold prices as it is an asset that doesnt bear any interest itself. Initially this was the case, with the popular metal trading from opening levels at 4210 before the Fed decision on Wednesday up to a one week high of 4248 early this morning. However, that is where the positive story ended and Gold prices have since traded back down to 4210 again at the time of writing (0700 GMT).
On a longer-term basis, the drivers underpinning prices still seem to remain in place, namely central bank buying dips, concerns over swelling government debt and an uncertain geopolitical outlook, but in the short-term Gold prices could be at the mercy of general risk sentiment, which is wavering after a disappointing Q3 earnings release from Oracle overnight, and positioning readjustment. This situation isnt helped by the reality that there is little in the way of scheduled risk events for traders to focus on until the release of US Non-farm Payrolls next Tuesday, December 16th (1330 GMT) and the interest rate decisions from the Bank of England, European Central Bank (December 18th) and Bank of Japan (December 19th).
This backdrop could suggest potential for some choppy price action ahead which may require traders to keep monitoring important support and resistance levels that could impact the direction of Gold moving forward.
Gold Technical Update: Watching the 4245/4265 Resistance Band
Since posting the 4381 October 20th high and 3887 October 28th low, Gold has entered a more balanced phase of sideways trading between these extremes. The overextended upside price conditions seen after the recent